S. 3248 — Health Savings Accounts For All Act of 2025

This section revises the annual contribution limit for health savings accounts (HSAs) under IRC §223(b)(1) to the elective deferral limit under §402(g)(1)(B) (e.g., $23,000 in 2024) for all account beneficiaries (from $4,150 for self-only high-deductible health plan coverage or $8,300 for family coverage). It establishes a new catch-up contribution limit under §223(b)(2) for individuals age 50 or older equal to the amount under §414(v)(2)(B)(i) (e.g., $7,500 in 2024, from $1,000 for age 55 or older); strikes prior paragraphs specifying separate employer contribution limits, coverage distinctions, and other coordination rules; and makes conforming changes to definitions and cost-of-living adjustments (changing the indexing base year to 2003). (As background, HSAs are tax-favored individual savings accounts for qualified medical expenses available to those enrolled in high-deductible health plans.) The changes apply to taxable years beginning after enactment.

This section eliminates the requirement under IRC §223(c) that an individual be an "eligible individual" (i.e., covered by a high-deductible health plan (HDHP) meeting minimum annual deductibles—$1,600 self-only/$3,200 family in 2024—and no disqualifying coverage) to make tax-deductible contributions to a health savings account (HSA). (As background, HSAs allow tax-free contributions, growth, and withdrawals for qualified medical expenses.) It strikes §223(c) and (g); redesignates subsections (d), (e), (f), and (h) as (c), (d), (e), and (f), respectively; and revises §223(a) to allow the HSA deduction for cash contributions by any individual. The section also (1) requires employers to make comparable HSA contributions (i.e., same amount or same percentage of annual deductible) to all comparable participating employees under the same health plan by coverage category (self-only or family), applied separately to part-time employees (fewer than 30 hours/week) and pro-rated for part-year employees; (2) treats qualified HSA distributions from employer plans as rollover contributions; and (3) makes conforming amendments to cross-references in §§26, 35, 106, 220, 408, 848, 877A, 4973, 4975, 4980G, and 6693. The amendments apply to taxable years beginning after enactment.

This section amends the definition of qualified medical expenses for health savings accounts (HSAs) as follows: (1) includes amounts paid pursuant to direct primary care service arrangements (i.e., coverage restricted to primary care services in exchange for a fixed periodic fee or payment); (2) expands the covered individuals to include any child (as defined in section 152(f)(1)) of the account owner who has not attained age 27 before the end of the taxable year (previously, the individual and qualifying dependents as defined in section 152 without regard to subsections (b)(1), (b)(2), and (d)(1)(B)); (3) strikes subparagraphs (B) and (C) of section 223(c)(2) and redesignates subparagraph (D) as (B); and (4) makes technical amendments to update cross-references in sections 220(d)(2)(A) and 106(f). The amendments made by subsections (a) and (b) apply to amounts paid after the date of enactment in taxable years beginning after such date, and the technical amendments apply to taxable years beginning after enactment.

This section establishes a special rule treating certain medical expenses incurred before the establishment of a health savings account (HSA) as qualified medical expenses eligible for tax-free reimbursement. (Thus, such expenses qualify if incurred in the taxable year of HSA establishment or the prior taxable year—provided the HSA is established before that prior year's tax return filing deadline, without extensions—and otherwise meet standard qualified medical expense requirements.) The rule applies to taxable years beginning after enactment.

This section establishes an exception under IRC section 223(e)(4)(A)—which imposes tax consequences on certain Health Savings Account (HSA) distributions—if the distribution corrects an administrative, clerical, or payroll contribution error, is received by the individual on or before the due date (including extensions) for filing the tax return for the taxable year, and is accompanied by the net income attributable to the erroneous contribution (includible in the individual's gross income for the year received). The amendment applies to distributions made after the date of enactment.

This section expands the individuals eligible to receive a health savings account (HSA) tax-free upon the account holder's death to include the account holder's child, parent, or grandparent (previously, only the surviving spouse). It further specifies that an HSA transferred to a child who is claimed as a dependent by another taxpayer (i.e., eligible for the deduction under IRC §151) is treated as the child's HSA. The changes apply to taxable years beginning after the date of enactment.

This section expands the list of items treated as qualified medical expenses eligible for tax-free distributions from Health Savings Accounts (HSAs) to include qualified wellness expenses—(i) vitamins, (ii) dietary supplements (as defined in the Federal Food, Drug, and Cosmetic Act), (iii) gym or fitness facility memberships, or (iv) wearable fitness trackers—for taxable years beginning after enactment.

This section provides equivalent bankruptcy exemption treatment for health savings accounts (HSAs, as defined in IRC §223) as for individual retirement accounts (IRAs, as defined in IRC §408) under 11 U.S.C. §522. (As background, §522 allows debtors to exempt certain property, including qualifying retirement funds under §522(b)(3)(C), from the bankruptcy estate; thus, HSAs receive the same protections.) The amendment applies to cases commenced after the date of enactment.